Asia Focus Of HSBC Drives Growth With A 141% Y-O-Y Increase In Profits For 2017

02/21/2018

HSBC bank said that its strategy of focusing on Asia was giving its growth after the lender announced a pre-tax profit of $17.2bn (£12.3bn) in 2017.

In the last year, the bank had made a profit of $7.1 billion and this year’s figure notes a 141per cent increase compared to a year ago.

But comparing with last year’s profit is not justified because the bank had to incur a number of ne time expenses that year which included the sale of its business in Brazil.

Asia forms a major market for the bank and a large chunk of its profits are generated from that market.

The bank said that that there is cause for being optimistic because of its lending on to China's Belt and Road projects and the chances of regional Asian trade deals.

"A large increase in reported profit before tax reflected both a healthy business and the non-recurrence of significant items from 2016," said group chairman Mark Tucker.

The company had reported a profit of $18.9 billion in 2015 which is far more than it latest profit reporting even though it is significantly higher this year compared to 2016.

Cutting down costs and streamlining of its business has been the recent focus of the bank which is also the largest bank in Europe.

The bank is also seeing a change at the top with its current chief executive Stuart Gulliver retiring and the reigns being taken over by John Flint.

The speed of implementing change at the bank is intended to be sped up according to Mr. Flint who was formally the head of retail banking and wealth management at HSBC.

For the growth of the bank, the key driving business segments in recent years have been wealth management, commercial and retail banking wealth management, commercial and retail banking and HSBC has said that it was reaping the benefits from its strategy of focusing on Asia.

The bank has significantly increased its presence in the Pearl River Delta area in China which is heavily populated. The bank has managed to acquire clients in the real estate and infrastructure sectors there while operating from its regional headquarters in Hong Kong, where it has had to increase its staff strength.

The company earned the majority of its global profits in 2017 from Asia where the bank noted a 89.3 per cent rise in its pre-tax profits at $15.3 billion compared to a year earlier.

In comparison, the bank posted a loss of 41.9 billion from its operations in Europe.

There has also been a 7 per cent hike in the total revenues generated for 2017 at $51.4 billion. it was $48 billion the year before.

But the stocks of the bank dipped despite the encouraging results because the markets were expecting a slightly better result.

While there was a drop of 4 per cent in stock price of HSBC in London, there was a dip of 3.1. per cent at the Hong Kong stock exchange.

The reason for the focus of the bank on Asia is very clear "with the Asian middle class set to balloon by a staggering two billion people by 2050", said Laith Khalaf, senior analyst at Hargreaves Lansdown.

"However, this approach comes with risks attached. The strength of HSBC's share price over the last two years has a lot to do with better-than-expected economic performance from China," he said.

"That's all well and good, but this cuts both ways, and looking forward if China sneezes, HSBC is going to catch a nasty cold."